Earned Benefit vs. Spousal Benefit

If you and your spouse are one of the increasing number of couples who will be receiving Social Security benefits based on your own work histories, you’re probably wondering whether each of you will also be eligible to receive a Social Security spousal benefit. Well, the answer is yes. However, before you begin planning how to spend that “extra” money, you need to understand how Social Security benefits work.

Simply stated, when you are eligible for two Social Security benefits, you usually get the higher of the two. The Social Security Administration has provided an example that helps to illustrate how the process works:

Bill Smith collects a Social Security benefit of $600 per month. His wife, Mary, is potentially eligible for a wife’s benefit up to 50 percent of Bill’s, of $300. However, Mary also worked and paid into Social Security, qualifying for her own retirement benefit of $400. She will not receive any wife’s benefits because her $400 retirement benefit, in effect, “offsets” her $300 wife’s benefit.

In most cases, the earned Social Security benefit will be higher than the spousal benefit. However, if one worker in the couple had substantially lower lifetime earnings than the other did, the spousal benefit may be the greater amount. In that case, there will be some extra money to toss around.

Of course, if one of you is receiving an annuity from a retirement system where you didn’t pay Social Security taxes, such as CSRS, the Government Pension Offset provision will reduce your Social Security spousal benefit by $2 for every $3 you receive in that annuity.

Also, the windfall elimination provision reduces the personal earned Social Security benefit of anyone with fewer than 30 years of substantial earnings under Social Security.